MINNEAPOLIS, Minn. -- International Multifoods Corp. (NYSE:IMC) announced on Sept. 10 it has completed the sale of its foodservice and vending distribution business to Wellspring Distribution Corp., a newly formed affiliate of Wellspring Capital Management LLC.
In July, Multifoods announced its agreement to sell the distribution business to Wellspring for $180 million in cash, which assumed working capital at closing of $135 million. Since then, working capital in the distribution business improved $14 million from the estimate to $121 million. The result, according to a release, was cash proceeds of $166 million.
Multifoods will use the $166 million of cash proceeds from the divestiture, plus $15 million of cash from the distribution business, to reduce debt by approximately $180 million.
The company also noted that the buyer is assuming the primary obligation on the operating leases for the distribution business' warehouses and vehicles that have a net present value of approximately $60 million, further reducing Multifoods' leverage.
After applying the proceeds to repay debt, Multifoods' total outstanding debt is expected to average approximately $370 million in the second half of its fiscal year ending March 1, 2003, down from nearly $600 million following the closing of its acquisition of the Pillsbury desserts and specialty products business from General Mills in November 2001.
"The sale of our distribution business is a critical step in Multifoods' transformation into a more predictable, higher-margin branded packaged food company," said Gary E. Costley, International Multifoods chairman and chief executive officer. "Foodservice distribution is no longer a strategic fit for Multifoods. The sale of these non-core assets allows us to pay down debt and strengthen our balance sheet as we prepare for future growth."